The Retirement Enhancement Act of 2019
Very quietly, the House passed the “Retirement Enhancement Act of 2019,” which was just sent to the Senate. This act could greatly affect retirement planning and estate planning in the future. Here are the three major changes as passed by the House:
Age Cap Repeal
Currently, you can’t make contributions to a regular IRA once you hit age 70.5. This new act eliminates this cap altogether. This change would allow older workers to stash a chuck of their earned income into a traditional IRA just as they currently can do in a Roth IRA.
NOTE: For those age 50 or over, the maximum contribution to an IRA is $7,000.
Increase in Age for Required Minimum Distributions (RMDs)
Currently, people need to start withdrawing money from their IRA or pensions in the year after they become 70 1/2. The new act raises this age to 72, which gives an 18 month increase in deferred growth.
Stretch IRA is Reduced
Although the new Secure Act does benefit some retirement account owners, it isn’t as friendly to non spouse heirs. Now, if you are a non spouse and inherit an IRA such as from your parents, you have the ability to stretch out required minimum distributions over your life expectancy.. Instead, the new act mandates that the inherited assets be withdrawn within 10 years.
I should note that the new act does give several exemption from the ten year rule. For example, surviving spouses are exempt as are the chronically ill, disabled and minor heirs.
The Senate also has a similar bill in the works. Thus, a reconciliation will be needed. I will be posting updates on this act as it winds its way through the Senate, and if it is signed by President Trump. So, stay tuned.
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